International Economics

IMMIGRATION IN UNITED
STATES OF AMERICA

William, Freja, Silja & Alexander M. V

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Tabel of contents
Problem statement....................................................................................................................................... 3
Describe...........................................................................................................................................................3
Analyse.............................................................................................................................................................3
Discuss:............................................................................................................................................................3

Macroeconomic goals in focus:.................................................................................................................... 3

Introduction................................................................................................................................................ 4

Describe....................................................................................................................................................... 5

Analysis....................................................................................................................................................... 6

Discuss......................................................................................................................................................... 8

Conclusion................................................................................................................................................... 8

Appendices.................................................................................................................................................. 9

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 Problem statement
Key question: What is the economic impact of immigration in The United States of
America?

Describe: The US is experiencing an immense amount of immigration, particularly from

Latin and South America. Account for the immigration and the timeframe of the last 10
years.

Analyse: What has this influx of immigrants done to the country’s economy? And what is the
consensus regarding the significant immigration?

Discuss:
What are the merits and demerits of this on the economic level, and what is the social impact
of this?

Macroeconomic goals in focus:

Low Unemployment

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Economic growth

Introduction
The United States of America has been grappling with the complex issue of immigration for
several years, particularly concerning recent decades' notable increase in immigrants from
Latin America and North Africa. This surge has ignited a heated debate within the country,
with proponents arguing that immigration has had a positive impact on both the economy and
society, while critics contend that it has brought about detrimental effects. Consequently, it
becomes essential to delve into the economic and social implications of immigration in the
USA. Over the past ten years, this question has generated extensive discourse and analysis,
highlighting the need to thoroughly examine the advantages and disadvantages associated
with this phenomenon. Therefore, this paper aims to investigate the multifaceted impact of
immigration on the American economy and social landscape, providing an in-depth
exploration of its merits and demerits. By undertaking this study, we seek to gain a
comprehensive understanding of the implications brought forth by immigration in the United
States.
Methodology
To determine the economic and social impact of immigration in the US, we have decided to
use a multitude of different tools. Firstly, a descriptive study will be conducted to understand
the magnitude of immigration in the US, both on a social and economic level. Here we have
accounted for immigration and its influence on the country during the timeframe of the last
10 years. Furthermore, we have done thorough research to best analyse the data collected. By
analysing this data, we have been able to identify the key trends and patterns in immigration,
helping us to establish a baseline for further analysis.

During this analysis, the impact of immigration on the economy will be conducted. Statistical
tools such as graphs will be employed to determine the relationship between immigration and
economic indicators such as GDP, aggregate demand (AD) and aggregate supply (AS),
wages, and unemployment. This analytical approach has enabled us to assess the direct and
indirect effects of immigration on the American economy. By examining these economic
indicators, it will be possible to identify any correlations or causal relationships between
immigration and economic outcomes in relation to the chosen macroeconomic goals.

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Describe
Over the last decade, the United States has witnessed a significant influx of immigrants,
particularly from Latin and South America. Several factors account for this immigration trend
and the timeframe of the last 10 years. One primary reason is the search for far better
economic opportunities. Many individuals from Latin and South America have been drawn to
the United States due to its robust job market, higher wages, and improved living standards.
Furthermore, economic instability, limited job prospects, and poverty in their home countries
have compelled them to seek a better life for themselves and their families.

Additionally, the close proximity of Latin and South America to the United States, as well as
the historical ties between these regions, have facilitated the flow of immigrants. The United
States has long been viewed as a land of opportunity and freedom, attracting people from all
corners of the world. Moreover, the existence of established immigrant communities in the
US, with established networks and support systems, has also played a role in encouraging
further immigration. The last 10 years have seen an increase in awareness and accessibility of
information, making it easier for individuals to learn about opportunities in the United States
and navigate the immigration process. However, it is important to note that the immigration
landscape is complex and multifaceted, influenced by various political, social, and economic
factors. Public policies, such as changes in immigration laws and regulations, have also
impacted the flow of immigrants. Immigration patterns can fluctuate over time based on these
factors, so it is crucial to consider the broader context when examining the immigration
trends of the last 10 years in the United States.

According to the United Nations Department of Economic and Social Affairs (UN DESA),
the United States has consistently been one of the top destinations for international migrants.
In their International Migration Report 2019, they estimated that the United States had a total
of 51 million international migrants in 2019, which accounted for approximately 18% of the
world's total migrant population.

During the coronavirus crisis, some estimations have pointed to the number of people
immigrating to the US being as low as 150-330 thousand people1. What problems have this
caused?

1
https://www.americanimmigrationcouncil.org/research/impact-covid-19-us-immigration-system

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Analysis
As of late 2021, the United States of America has officially been experiencing one of the
biggest labor shortages ever. One of the main reasons for this is, that at the peak of the global
covid-19 crisis, more than 120,000 businesses closed, resulting in over 30 million people
losing their jobs. Furthermore, we see a steep trend in workers retiring earlier and earlier than
they should. As of October 2021, more than 3 million US citizens left the workforce before
reaching the age of 55. 2
Even before the pandemic, people were leaving their jobs behind in some sectors such as
child- and healthcare. The U.S. had a significant issue with the lack of accessible and
affordable childcare, which hindered workforce participation. Research from the U.S.
Chamber of Commerce Foundation highlighted the economic impact of this problem, with
states like Alaska, Arkansas, Arizona, Missouri, and Texas losing an estimated $2.7 billion
annually due to childcare-related issues. The pandemic worsened these challenges, causing
many childcare providers to close and leading to a substantial loss of jobs, particularly
affecting women. Simultaneously, women's labour force participation rates dropped to levels
as low as in the 1970s.3

The economy is greatly affected when a huge number of people quit or lose their jobs. One of
the main effects is a decrease in the workforce, which can result in a reduction in the
economy's total production capacity and a decline in economic output, which causes the long-
run aggregate supply curve (LRAS), as shown in annex 2, to shift inwards.

This is closely tied to the total consumption. These parameters have decreased significantly
over the given period. Firstly, it took a steep dive during the global health crisis. This was
because many businesses were temporarily closed, and some even ended up shutting down.
Furthermore, the rule to stay inside their homes, caused people to spend less of their money
since it was far less easily accessible. The coronavirus crisis has, therefore, caused inflation
to increase significantly. This inflation has further been intensified by the Russia-Ukraine war
in east Europe.

2
https://www.uschamber.com/workforce/understanding-americas-labor-shortage
3
https://www.bls.gov/news.release/empsit.nr0.htm

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All these factors (people losing their jobs, increasing inflation, etc.) have led to people having
less money available, thus their disposable income has been decreased. This has caused the
marginal propensity to consume to decrease significantly. When people spend less money a
number of things happen, such as reduced demand, decreased business revenue, increase in
unemployment. When consumers spend less, there is consequently a decrease in demand.
This decrease in demand means that the firms’ revenue will decrease since how they earn
money is through consumer spending. If businesses start to perform less efficiently, firms
might need to reduce their workforce to compensate for the lost revenue, meaning that there
will be an increase in unemployment.
This means there is ultimately less money circulating in the economy: The government
collects less tax, and people spend less on businesses causing them to earn less money,
ultimately harming every single variable in the GDP formula (consumer expenditure,
investment, export, and Government spending). Causing deflationary pressure, because of a
lack of stimuli in the economy (as seen in Annex 3) The pressure in not significant due to the
factors aforementioned, driving up the inflation, thus countering the pressure.

To address this shortage, the U.S. government launched various initiatives, such as the
Bracero Program, which allowed temporary agricultural workers from Mexico to work in the
United States. Additionally, women were encouraged to enter the workforce to fill the
vacancies left by men serving in the military.

Furthermore, we know for a fact that immigration fuels the economy. When immigrants join
the workforce for a given country, they directly increase the maximum potential output.
This phenomenon occurs because the influx of newcomers to the country injects additional
funds into circulation, simultaneously driving up demand. Consequently, overall consumer
spending surges, channeling more financial resources into businesses, leading to enhanced
revenue and business expansion. Furthermore, this also leads to an uptick in tax revenue,
stemming from both the incoming immigrants (new consumers) and the expanding firms,
which are responding to the heightened demand. As the demand swells due to the influx of
new consumers, firms expand in size, subsequently increasing their supply and thus
bolstering economic growth. Moreover, as tax revenues grow, the government may
implement an expansionary fiscal policy, involving increased government spending to

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enhance public services. This directly influences aggregate demand (AD). Notably, the
eventual increase in AD surpasses the initial spending and AS, as seen in Appendix 4. In fact,
any increase in aggregate demand leads to a proportionally larger boost in national income,
due to the multiplier effect. Given that government spending constitutes an injection,
originating from outside the circular flow of income, it directly augments the money supply
positively.

As previously stated, an increase in aggregate demand will lead to a proportionately larger

increase in national income because money is multiplied through the economy by money
changing hands, i.e., employees receive income from a company or the government and then
spend a portion of that (MPC). Since the amount of money multiplies each time, it is
transferred, the rise in national income is proportionately greater each time.

Discuss
Immigration has been a widespread and controversial topic in the United States for many
years. Although it brings significant changes in the country's social and economic level, it
also creates both positive and negative effects.

Immigration has been a significant factor in shaping the United States economy and society.
On an economic level, immigration has helped contribute to labor force growth, which has
supported economic expansion, especially in sectors that require low-skilled labor.
Historically immigrants have had an important role of innovation and entrepreneurship,
which has contributing to many successful businesses across United States and increased job
creation and economic growth. Besides that, immigrants also pay taxes, including income,
property, and sales taxes. Which means, that the government has more money, and has an
opportunity to spend, injecting money into the circular flow of income.
However, there is some challenges, one of the most significant economic demerits of
immigration in the United States is the strain it puts on the country’s social services. The
immigrants who come to the United State often have a lower level on education and skills,
which leads to a higher dependency on social welfare programs because of the increased
demand for public services such as healthcare, education, which can be challenging to
provide for both the existing citizens and the immigrants. This had resulted in a force on the

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United States economy as the government now have to provide more resources to support the
social welfare programs.

However, on a social level it is more complex and controversial. Immigration has contributed
to brining in a diversity of languages, traditions, and perspectives to the United States culture.
They have also helped develop strong social networks and support systems, and these
networks can provide a sense of belonging and support not only for newcomers but also for
the existing citizens. But immigrants in the United States face significant challenges such as
discrimination, social tensions, cultural clashes, and even segregation in some areas. Which
has negative consequences for their social integration and well-being in the United State.

Despite these challenges, immigration has played a significant role in the United State, they
have filled critical gaps in various sectors, and their contribution to the economy has been
crucial.

Conclusion
Over the past 10 years the US has experience an immense amount of immigration from Latin
and south America. Therefore, we can conclude that the influx of immigration has had a
significant social and economic merits and demerits. The country has benefited from the
labour force provided by the immigrants in several areas after the Bracero Program was
created i.e. The immigrants could now help build up the US after the decrease of the GDP.
The immigrants have additionally also contributed to the “rebuild” and development of the
country by paying taxes to the government, but also investing in their own businesses through
expenditure. However, the increase in the population over the past 10 years has also led to
difficulties, challenges and pressure on public services as more people equal to more labour
force needed. An issue that some of the immigrants have faced in the US is social challenges
such as lack of integration, social barriers or/and discrimination from the rest of the
population.

All in all, the government has made several initiatives to help the immigrants integrate into
the society. You could call immigration in the US a double-edged sword offering both
economic benefits while also lacking the social and economic security that a country would

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prefer in their workforce; we can also conclude that the problem-solving tool needed is with
the politicians, this tool needs to be implemented to maximize the positive impact of
immigration, but also striking down on the negative drawbacks. The tool could be a new
immigration reform that would focus on the positive points stated above, harnessing the full
potential of the immigrants in America. The complex problem of immigration in America is
an issue that requires careful considerations and thoughtful, maximizing solutions.

Sources
“The Impact of COVID-19 on Noncitizens and Across the U.S. Immigration System”
(visited: 31th of August 2023) https://www.americanimmigrationcouncil.org/research/impact-
covid-19-us-immigration-system

“Understanding America’s Labor Shortage” (visited: 3rd of September)

https://www.uschamber.com/workforce/understanding-americas-labor-shortage

https://www.bls.gov/news.release/empsit.nr0.htm

“immigrations impact on the United States” (visited: 4th of September)

https://www.cato.org/cato-journal/fall-2021/effects-immigration-entrepreneurship-innovation

“Undocumented Immigrants’ State & Local Tax Contributions” (visited: 4th of September)
https://itep.org/immigration/?
gclid=Cj0KCQjw0vWnBhC6ARIsAJpJM6cfqZYeV6WLWNN9Mj3MKj9Ij8hs3fh8dOyRFg
RwlgsKc5m119gghZIaAqirEALw_wcB

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Appendices

Appendix 1

Appendix 2

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Appendix 3

Appendix 4
Title – IMMIGRATION AFTERMATHS

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